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Bring Down the Hammer on a Builders' Bailout

"Hey, Ben. Looks like another group just showed up, hard hats in hand, to get in line for our exciting fall bailout program. This thing's become a smashing success!"

The first sentences from a weekend call by Treasury Secretary Hank Paulson to his trusty sidekick, Ben Bernanke? Maybe, but if so, Paulson is only referring to the latest in a crazy campaign by all manner of downtrodden groups to have Uncle Sam hold their hands and stuff their wallets -- with your money.

This time, with the top dogs from General Motors(NYSE:GM), Ford(NYSE:F), and Chrysler having been escorted back aboard their Gulfstreams empty-handed, the nation's homebuilders have clambered into the federal soup line. They're taking out full-page newspaper ads pushing for a measly $250 billion to fund their "Fix Housing First" package.

Under their proposal, the government -- a.k.a. you and I -- would treat the still rapidly fading housing market by topically applying:

A tax credit for homebuyers equal to 10% of the value of the home. The credit would be capped at $22,000, about triple the $7,500 amount that Congress blessed earlier this year. Unlike the old credit, this builder-proposed credit wouldn't be repaid.

A subsidy on interest rates for conforming loans -- meaning that they meet standards for Fannie Mae(NYSE:FNM), Freddie Mac(NYSE:FRE), and the Federal Housing Administration -- to bring mortgage rates to 3% from the current level near 6.2%. The National Association of Homebuilders estimates that this portion of its program would carry about a $143 billion price tag.

Fine, but I have a pair of questions here: First, when will the government spigot tighten? With pet food prices rising almost daily, aren't the loving owners of Floppsy and Phydeaux entitled to some government largess? Or, as a devout fan of football, I'm ringing up more and more of a tab just to attend the games. Shouldn't I be getting a ticket-price buydown, along perhaps with a little public sector transportation and parking vigorish?

Second -- and even more importantly -- isn't the proposal for a public-private mutual back-scratching just the sort of foolishness that got us into this now-global housing mess in the first place? As a former operative of one of the nation's major builders, I'm pulling for a cure for the likes ofToll Brothers(NYSE:TOL) and Lennar(NYSE:LEN). But not if it results in a medical bill that perpetuates the problem and financially hammers you, me, and Phydeaux's folks.

Foolish contributor David Lee Smith doesn't own shares in any of the companies mentioned above. He does, however, welcome your questions, comments, or kibitzing. The Fool has an elegantly built disclosure policy.